Lithium rug pull

We think lithium is still sexy, just like Totem’s Electric Alfa Romeo GTA conversion

While lithium stocks had been frothy prior to this week’s sell-off, based on research we have received and collated we think the pull-back is now overdone, and moves in North American Lithium equities are giving us further confidence.

The possible reasons for the sell-off:

1.     Broker reports stating that there is a wall of low grade/high cost supply entering the market tomorrow & another investment bank downgrading their price deck (ahem Goldman Sachs and Credit Suisse);

Consensus remains that the lithium market will remain tight for the foreseeable future. This is an industry in its infancy and the investment community is still learning what really matters. We expect that bringing projects online and ramping to nameplate capacity will take longer and will cost more than most expect.

2.     Unsubstantiated report stating that Chinese electric vehicle maker BYD Co Ltd is in talks to buy 6x Lithium mines in Africa that will meet its demand for the next 10 years; and

This statement seems flawed in its tonnage but also, logistically, challenges are likely to limit the pace at which new projects in Africa are developed and ramp up to full production.  

3.     Argentina implementing a Reference Price for exported lithium carbonate

We believe that the LCE price reference of US$53,000/t was not to set a production cap or a pricing cap. Instead, it was as move by the Government to better understand variances in realised lithium prices and contract pricing.

As Shaw and Partners recently stated in their June 2 report, “To keep pace with demand, we think significant further investment in supply is required”. We agree.

Caldera House Lithium Clients

Core Lithium (ASX:CXO) – Australia’s next lithium producer

CXO’s Finniss Lithium Project lies within one of the most prospective areas for lithium in the NT – the Bynoe Pegmatite Field. Recently, the grant of the environmental approval for the BP33 Underground Mine and the award of the crushing contract to CSI have been significant achievements, underpinning both an on-schedule construction timeframe and a pathway to expanded production life of the Project.

Critical Resources (ASX:CRR) - Province scale strategy in Ontario, Canada

CRR is an emerging lithium and base metals company, 100% owning the Mavis Lake Lithium Project in Ontario, Canada, where the inaugural 5,000m drill program has been experiencing continued success, with 20 of the first 21 holes intersecting spodumene-bearing pegmatite.

CRR recently also announced that they had commenced a 4-week long field program at its 100% owned Graphic Lake Lithium Project in Ontario, Canada.

Greenwing Resources (ASX:GW1) - A team that has brought lithium projects to production

Planning is currently underway for a maiden drilling program at the company’s San Jorge Lithium Project, located in Argentina’s prolific Lithium Triangle, where the company is investigating the suitability of Direct Lithium Extraction (DLE).

Lord Resources (ASX:LRD) - Recently listed and driving towards WA’s next big discovery

LRD is a mining exploration company, and includes ownership of the Horse Rocks Project, which is perfectly positioned in WA’s emerging Lithium Super-Province, the project is 8km west of the Mt Marion Lithium Mine. Comprehensive mapping and geochemical sampling for lithium will be completed as soon as the tenement is granted.

Core Lithium, Critical Resources, Greenwing Resources and Lord Resources are Caldera House clients.

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